Homeready Loans Update
August 26, 2020
ROn July 20,1029 we will see the following changes implemented across the board on all HomeReady Loans.
HomeReady income limits
Desktop Underwriter (DU®) eligibility assessment.
HomeReady Income Limits
HomeReady is designed to help lenders serve very low-, low-, and moderate-income creditworthy borrowers and to help fulfill the affordable housing mission and regulatory housing goals. It offers reduced mortgage insurance costs and lower loan-level price adjustments for loans with low down payments (compared with similar non-HomeReady loans).
Currently, to be eligible for a HomeReady loan, the borrowers’ total annual qualifying income may not exceed 100% of the area median income (AMI) for the property’s location. There is no income limit for properties located in low-income census tracts (census tracts where the median income is not greater than 80% AMI). To better align with housing goals, they are changing the income limit requirements for all HomeReady loans to not exceed 80% AMI for the property’s location. (This includes properties in low-income census tracts.)
FNMA remains committed to serving borrowers with income that exceeds the 80% AMI limit. These borrowers may continue to be eligible for low down payment loans under our standard (non-HomeReady) eligibility policies. Refer to the Eligibility Matrix; Selling Guide, B2-1.2-01, Purchase Transactions; and B2-1.2-02, Limited Cash-Out Refinance Transactions, for additional information.
DU Eligibility Assessment
As part of normal business operations, FNMA regularly reviews DU to determine whether its risk analysis and eligibility assessment are appropriate based on the current market environment and loan performance information. As a result of their most recent review, they will be updating the DU eligibility assessment to better align the mix of business delivered to Fannie Mae with the composition of business in the overall market. As a result, certain new loan casefiles submitted to DU on or after July 20, 2019 will receive an Ineligible recommendation when multiple high-risk factors are present.
Effective Dates
All of the above changes will apply to new loan casefiles submitted to DU the weekend of July 20, 2019
.The 2019 HomeReady income limits will also be implemented in DU and in the HomeReady Income Eligibility Lookup Tool at the same time.
The new limits and the 80% AMI change will apply to manually underwritten loans with application dates on or after July 20, 2019.
On July 3, 2019 the Selling Guide will be updated to reflect the HomeReady 80% AMI limit.
Unlike government-insured loans, HomeReady, borrowers may have the option to cancel their mortgage insurance once their home equity reaches 20%. This can result in lower monthly payments down the road.
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